Tribal Risk Factors

Tribal risk factors can be divided into the following types:

Cultural Sensitivity

Whenever an outside entity is brought into a tribal setting to help develop a project, there is a risk that the people involved will not be sensitive to cultural values. The level of risk will often depend on whether or not the personnel have prior tribal experience. These relationships can fail simply because the parties do not understand each other. Have these people ever dealt with a tribe? What is their level of knowledge and expertise in working in Indian country? What do they know about your tribe's culture and history? The tribe may need to plan to help educate its new business partners.

Once you have decided that the business relationship is worth pursuing, consider bringing in respected elders or tribal historians to educate your business partners. Take them on a tour of your housing areas, schools and government offices. Consider inviting them to a powwow, dance, community meal or ceremony, so they can get a sense of who you are. These experiences have a tendency to create a level of trust and understanding that is reciprocal, helping both parties.

Technical Expertise

Each type of power generation calls for its own level of technical knowledge, both at the development stage and at the operations and maintenance stage. A common challenge is acquiring and retaining appropriate levels of technical knowledge and employees who have the expertise necessary to operate and maintain the generation facilities. The level of expertise must match the technology used for the facilities. Wind power generation, for example, calls for specialized expertise that may not be met by experts knowledgeable in nuclear power generation. Careful selection of experts needed for all stages of development will help eliminate risks of failure.

Tribal Job Development

Tribes must often be willing to compromise, allowing outsiders with expertise in the industry to develop and operate the facilities until tribal members can be trained to take over operations. To understand how this will work, the tribe must know what level of expertise will be required and what level of training will be needed for the tribal work force. Uncertainties in this area should be resolved early, so there are no surprises on either side. Financiers may be included in this discussion, as they will want assurance from the tribe and developer that the project will run smoothly and have a continuity of properly trained operators.

Financial Security

Loans from outside lending organizations are often required to finance construction or other project expenses. Lenders will insist on adequate collateral to secure the loan. If the project is likely to produce revenues sufficient to retire the debt, lenders will sometimes be satisfied with a lien on the revenues, and perhaps a lease mortgage in the event they have to take over the facility to retire the debt. Generally, these projects will be constructed on trust property that may be used as collateral to finance the project, but the tribe will not want to create a risk that the lands will be taken out of trust in the event of foreclosure. This is where the lease mortgage comes into play.

A lease mortgage can be created for the term of the debt to provide the lender with the ability to assume control of the project, or the land upon which the project is located, in the event of default on the loan. A lease mortgage may be created in whole on the face of the loan documents, or it may be supported by a tribal code that governs foreclosure proceedings that must be brought into tribal court. If the lease mortgage is for a term of over seven years, the Bureau of Indian Affairs must approve the arrangement under 25 U.S.C. § 81. See the Financing Options section for more information.

Environmental Impacts

Environmental impacts vary with different types of generation. For more information, see the Environmental Considerations section. Impacts may be minimized with "green" power generation, but they will not be eliminated entirely. For instance, wind generation eliminates pollution problems associated with fossil fuel generation, but unless carefully sited, but wind turbines can still pose a risk to birds and have visual impacts. Regardless of the type of generation, careful attention must also be paid to impacts on culturally sensitive and sacred sites when siting the equipment. For more information, please see the Cultural Issues section.

Continuity in Tribal Leadership

Changes in the Tribal leadership before the project is completed can cause project failure. To avoid this risk, the Tribe may want to consider instituting mechanisms that commit the Tribe to the project. For example, the Tribal Council may want to obtain the approval of the General Council to ensure project completion. Not only will such approval help give developers and financiers the confidence they need to move forward with the project, but it also gives the Council the confidence that the membership supports the project. The project's success will depend on the support of the community.